Exhibit 10.2

STATE OF SOUTH CAROLINA    )
                           )              EMPLOYMENT AGREEMENT
COUNTY OF CHARLESTON       )


         THIS EMPLOYMENT AGREEMENT  (hereinafter referred to as the "Agreement")
made  and  entered  into  as of  this  12th  day of May,  2006,  by and  between
Southcoast  Community  Bank,  (hereinafter  the  "Bank"),  Southcoast  Financial
Corporation  (the "Company") and William C. Heslop  (hereinafter  referred to as
the "Employee"), is made with reference to the following facts:

                                   RECITALS:

         A. The  Employee  shall be  employed  as the Vice  President  and Chief
Financial  Officer of the Bank and as Vice President and Chief Financial Officer
of the Company.

         B. The Employee has obtained  substantial  senior financial  management
experience  throughout  his  career,  and can be  expected  to make  substantial
contributions  to the  financial  success  of the  Bank and the  Company  and to
contribute to the growth and development of the Bank and the Company through his
knowledge and experience in the business,  affairs,  and management of financial
organizations such as the Bank and the Company.

         C. The Bank and the Company  consider the  retention of the Employee in
their service to be in their best interests in order to insure and contribute to
the  continuity  of  management  of the Bank and the  Company  and to insure and
contribute  to the future  progress  and  financial  success of the Bank and the
Company.

         D. The Bank  and the  Company  recognize  that in order to  retain  the
Employee's services, they must offer him compensation,  benefits and termination
rights  which  executives  of  comparable  background,  experience,  ability and
expertise receive for such an executive position with a business organization of
similar size and complexity.

         E. The parties  desire to enter into this  Agreement  setting forth the
terms and conditions of the employment  relationship among the Bank, the Company
and the Employee.

         THEREFORE,  in  consideration  of the premises and the mutual covenants
herein set forth, it is mutually understood,  stipulated,  covenanted and agreed
by and between the parties hereto, as follows:

         1. Employment. The Bank and the Company each hereby employ the Employee
in a principal  executive and managerial capacity as an officer having the title
of Vice President and, after May 12, 2006, Chief Financial  Officer of each, and
the  Employee  hereby  accepts  such  employment  upon the terms and  conditions
hereinafter set forth.

         2. Term.  The  initial  term of this  Agreement  shall be for three (3)
years beginning on the date of execution hereof (the  "Commencement  Date").  At
the end of each day, the term of this Agreement shall be automatically  extended
for one  additional day unless the Employee is terminated or unless either party
gives written notice to the other that the term of this Agreement will not be so
extended.  References in this Agreement to the term of this  Agreement  refer to
the initial term and any extended term.

         3.  Compensation.  The basic annual  salary which the Bank shall pay to
the Employee for his services  shall be not less than  $100,000,  payable in not
less than 12 installments  for each full year during the term of this Agreement.
To the  extent  not paid by the  Bank,  such  compensation  shall be paid by the
Company.

         4.  Benefits.  In addition to the basic  compensation  hereinabove  set
forth, the Bank agrees to pay or supply the following benefits:

         (a) Life  Insurance.  The Bank  shall  provide  Employee  with the life
insurance benefits provided on Schedule A hereto.

         (b) Health  Insurance.  The Bank shall  provide the Employee  with such
health and dental insurance benefits as may hereafter be made available to other
executive officers of the Bank.


<PAGE>

         (c)  Disability.  The Bank shall provide the Employee  with  disability
insurance  in an  amount  equal at all times to not less  than  one-half  of his
annual base salary.

         (d)  Retirement  and Employee  Benefit  Plans.  The  Employee  shall be
entitled to participate in any plan adopted by the Bank or the Company  relating
to stock options, stock appreciation rights, stock purchases,  pension,  thrift,
profit sharing, bonus, performance award and incentive compensation,  group life
insurance,  medical  insurance,  education  and  other  retirement  or  employee
benefits  that the Bank or the  Company  may have  already  established,  or may
hereafter  adopt,  for the benefit of the executive  employees of the Employee's
class or all employees of the Bank or the Company, including executive employees
of the Employee's class.

         (e) Disability/Salary Continuation. The Bank shall pay the Employee his
full salary then in effect and continue all benefits then in effect for a period
of one year after the Date of Termination (as hereafter defined) in the event of
the partial or complete Disability of the Employee.  "Disability" shall mean the
Employee's  failure to  satisfactorily  perform the  essential  functions of his
office on a full-time basis for one hundred and eighty (180)  consecutive  days,
with or without accommodation,  by reason of the Employee's incapacity resulting
from physical or mental illness or impairment,  except where within fifteen (15)
days after Notice of Termination  (as  hereinafter  defined) is given  following
such absence,  the Employee shall have returned to the  satisfactory,  full time
performance of such duties.  Any determination of Disability  hereunder shall be
made by the Board of Directors of the Bank in good faith and on the basis of the
certificates  of at  least  three  qualified  physicians  chosen  by it for such
purpose, one of whom shall be the Employee's regular attending physician.

         (f) Other  Benefits.  The Bank shall  provide  the  Employee  all other
remunerations and fringe benefits as are available to executive  officers of the
Bank,  and any  other  benefits  commensurate  with  the  responsibility  of and
functions performed by the Employee under this Agreement.

         (g) Payment of Shortfall by Company.  To the extent not provided by the
Bank,  the benefits set forth in this Section 4 will be provided by the Company.

         5.  Duties.  The Bank and the  Company  recognize  the  managerial  and
executive  ability of the Employee,  and in recognition of those abilities,  the
Bank  designates  the Employee as its Vice  President  and,  after May 12, 2006,
Chief  Financial  Officer and the Company  designates  the  Employee as its Vice
President and, after May 12, 2006, Chief Financial  Officer,  which titles carry
with them the  duties as  specified  in the bylaws  and the  resolutions  of the
Boards of Directors of the Bank and the Company. In this capacity,  the Employee
is granted such  authority and is responsible  for such executive  duties as are
commensurate  with the authority  being  exercised and duties being performed by
the Chief Financial Officer immediately prior to the date of May 12, 2006 and as
may  hereafter  be  designated  by the  Boards of  Directors  of the Bank or the
Company.  The  Employee  shall  perform  his  duties  in  accordance  with  such
reasonable standards established from time to time by the Boards of Directors of
the Bank and the Company.  In the performance of his duties, the Bank and/or the
Company will continue to make available to the Employee offices, secretarial and
other  assistance,  facilities and amenities  commensurate with his position and
duties.

         6. Termination of Employment.

         (a) Termination by the Company and the Bank.

          (i) Termination for Cause.  The Employee shall be subject to discharge
     for  Cause,  and  this  Agreement  thereby  terminated.  As  used  in  this
     Agreement, "Termination for Cause" shall mean termination on account of the
     following acts:

               (A) the breach by  Employee  of any  material  provision  of this
          Agreement,  provided  that the Company or the Bank gives the  Employee
          written  notice of such  failure and such  failure is not cured within
          thirty (30) days thereafter;



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<PAGE>

               (B)  the  willful  and  continued  failure  by  the  Employee  to
          substantially  perform his duties under this Agreement (other than the
          Employee's   inability   to  perform,   with  or  without   reasonable
          accommodation, resulting from his incapacity due to physical or mental
          illness or impairment),  after a demand for substantial performance is
          delivered to him by the Company or the Bank, which demand specifically
          identifies  the  manner in which the  Employee  is alleged to have not
          substantially performed his duties;

               (C) the willful engaging by the Employee in misconduct (criminal,
          immoral or  otherwise)  which is, or is likely to  become,  materially
          injurious to the Company or the Bank;

               (D) the Employee's conviction of a felony;

               (E)  the  commission  by  the  Employee  in  the  course  of  his
          employment  of  an  act  of  fraud,  embezzlement,   theft  or  proven
          dishonesty,  or  any  other  illegal  act  or  practice,  which  would
          constitute a felony, (whether or not resulting in criminal prosecution
          or  conviction),  or any act or  practice  which has  resulted  in the
          Employee's  becoming  unbondable  under the Bank's  "banker's  blanket
          bond;"

               (F) failure by the  Employee to comply with clear  provisions  of
          law and regulations applicable to the Company or the Bank which is, or
          is likely to become,  materially injurious to the Company or the Bank;
          or

               (G) removal or permanent  prohibition  from  participating in the
          affairs  of the Bank by an  order  or  consent  issued  under  Section
          8(e)(4) or (g)(1) of the Federal Deposit Insurance Act.

The Employee  shall have no right to receive  from the Bank or the Company,  and
shall not receive from the Bank or the Company,  compensation  or other benefits
provided  for herein or  otherwise  provided  by the Bank or the Company for any
period after the date of Termination  for Cause.  Notwithstanding  the foregoing
provisions  of this  paragraph,  no  Termination  for Cause shall affect  vested
rights of the parties hereto.

                    (ii) Termination Other Than For Cause.

                    (A)  The  Employee  may be  discharged  and  this  Agreement
               terminated for reasons other than those specified in subparagraph
               6.(a)(i) in the discretion of the Company or the Bank.  Except as
               otherwise   limited  herein  or  as  otherwise   limited  by  the
               regulations of the Federal  Deposit  Insurance  Corporation,  the
               Bank agrees that a termination by it of the Employee's employment
               prior to the expiration of the term of this Agreement pursuant to
               this  subparagraph  6.(a)(ii)  shall not prejudice the Employee's
               right to full compensation or other benefits provided for in this
               Agreement  until the  expiration  of the  remaining  term of this
               Agreement,  unless the Employee  shall take a leave of absence or
               shall become disabled as described in paragraph (4)(e) hereof, in
               which case the provisions of paragraph (4)(e) shall apply.

                    (B) Any  resignation  by the Employee  pursuant to paragraph
               6.(b) below at any time following a change in control of the Bank
               or the  Company,  as  hereinafter  defined,  shall  constitute  a
               termination  of  employment by the Bank or the Company other than
               Termination for Cause and shall entitle Employee to the following
               compensation  and  benefits,  but  only  if such  resignation  is
               preceded  by  either  (1) any  material  decrease,  or  series of
               decreases  which taken as a whole are material,  in the nature or
               scope of the Employee's duties, responsibilities and authorities,
               without the written  consent of the Employee as to each and every
               such decrease, from the greater of those duties, responsibilities
               or  authorities  being  exercised  and  performed by the Employee
               immediately  after  the date of the  execution  hereof,  or those
               being exercised and performed  immediately prior to the reduction


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<PAGE>

               or series of reductions  thereof;  or (2) any attempt by the Bank
               or the Company to relocate the Employee to a location  outside of
               Mount  Pleasant,  South  Carolina  without  his  written  consent
               thereto given not more than one (1) year prior thereto.

                    The  compensation  and  benefits  which  shall  be paid  and
               provided,   respectively,   to  the  Employee  pursuant  to  this
               paragraph   6.(a)(ii)(B)  shall  be  the  full  compensation  and
               benefits provided for in this Agreement for a period of three (3)
               years from the Date of  Termination.  Such payments shall be made
               and such  benefits  shall be provided  notwithstanding  any other
               employment  obtained by Employee.  For purposes of the foregoing,
               the phrase  "change in control" of the Bank or the Company  shall
               refer to either or both of the following:  (1) acquisition in any
               manner of the  beneficial  ownership of shares of the Bank or the
               Company  having 51% or more of the total number of votes that may
               be cast for the election of one or more  directors of the Bank or
               the Company,  respectively, by any person, or persons acting as a
               group  within  the  meaning of  Section  13(d) of the  Securities
               Exchange Act of 1934;  or (2) any other  circumstances  which the
               Board of Governors of the Federal  Reserve  System has determined
               constitutes or will constitute a change in control of the Bank or
               the Company.

          (iii) Excess Parachute Payment.  Notwithstanding the foregoing, if the
     payments  under  Section  6(a)(ii),  either  alone or  together  with other
     payments  which the Employee has the right to receive from the Bank and the
     Company, would constitute a "parachute payment" (as defined in Section 280G
     of the  Internal  Revenue  Code of 1986,  as amended  (the  "Code")),  such
     severance  payment shall be reduced to the largest amount as will result in
     no portion of the  severance  payment under this Section 6 being subject to
     the excise tax imposed by Section 4999 of the Code or the disallowance of a
     deduction to the Bank under Section 280G(a) of the Code.

          (iv)  Determination.  The  decision  of the  Bank  or the  Company  to
     terminate  the  Employee's  employment  for  Cause  shall  be  made  in the
     following  manner.  The full Board of Directors of the  terminating  entity
     shall  review   completely   the  evidence  and   justification   for  such
     termination.  The Employee  shall be given notice and an  opportunity to be
     heard in order to rebut such  evidence.  Thereafter,  termination  shall be
     voted upon by the full Board of Directors of the terminating entity by roll
     call vote. The Employee shall be so terminated upon a vote of not less than
     two-thirds  (2/3)  of  all  members  of  the  Board  of  Directors  of  the
     terminating  entity. The Board of Directors of the terminating entity shall
     specify an effective date of termination in the Notice of Termination.  Any
     termination not meeting these  requirements  shall not be a Termination for
     Cause under Section  6.(a)(i) but shall be deemed to be a  Termination  for
     Other Than Cause under Section 6.(a)(ii).

              (b)  Termination by Employee.  This Agreement may be terminated by
Employee at any time by Employee's  giving  written Notice of Termination to the
Bank and the  Company  not  less  than  ninety  (90)  days  prior to the Date of
Termination.  In such event, the Bank and the Company shall be obligated only to
continue to compensate and provide the benefits  hereunder to Employee up to the
Date of  Termination.  This provision  shall not be interpreted as in any manner
whatsoever limiting the rights of the Employee under any other agreement between
the Employee and the Bank or the Company,  including,  without  limitation,  any
retirement,  deferred compensation,  or fringe benefit agreement, whether or not
such agreements are in existence at the time of the execution hereof.

              (c)    Required    Suspension    and    Termination    Provisions.
Notwithstanding any other provision of this agreement,  the following provisions
are included in this Agreement concerning its termination.

                    (i) If the Employee is suspended or  temporarily  prohibited
     from  participating in the Bank's affairs by a notice served under 12 U. S.
     C.  Section  1818(e)(3)  or  (g)(1),  the  Bank's  obligations  under  this
     Agreement  shall be  suspended as of the date of service  unless  stayed by
     appropriate  proceedings.  If the charges in the notice are dismissed,  the
     Bank  may in its  discretion  (i)  pay  the  Employee  all or  part  of the
     compensation  withheld  while the  obligations  under this  Agreement  were
     suspended and (ii) reinstate (in whole or in part) any of such  obligations
     which were suspended.



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<PAGE>

                    (ii) If Employee is removed  and/or  permanently  prohibited
     from  participating  in the affairs of the Bank by an order issued under 12
     U.S.C.  ss.  1818(e)(4)  or  (g)(1),  all  obligations  of the Bank and the
     Company under this  Agreement  shall  terminate as of the effective date of
     the order.

                    (iii) If the Bank is in default  (as  defined in 12 U. S. C.
     Section  1813(x)(1)),  all obligations under this Agreement shall terminate
     as of the date of default.

                    (iv) Any  payments  made to the  Employee  pursuant  to this
     Agreement,  or  otherwise,  are  subject  to  and  conditioned  upon  their
     compliance  with 12  U.S.C.  Section  1828(k)  or any  successor  provision
     thereof and any regulations  promulgated  thereunder.  Notwithstanding  the
     provisions of t his subsection (c) of Section 7, no termination pursuant to
     this subsection (c) shall affect vested rights of the parties hereto.

         (d) Date of Termination. "Date of Termination" shall mean:

                    (i) if the Employee's  employment is terminated by reason of
     his death, his date of death;

                    (ii) if the Employee's employment is terminated for
     Disability, thirty (30) days after Notice of Termination is given (provided
     that the Employee shall not have returned to the  performance of his duties
     as provided under Section 4(e) hereof); or

                    (iii) if the  Employee's  employment is terminated by action
     of either party for any other reason,  the date  specified in the Notice of
     Termination;  provided,  however, that if within thirty (30) days after any
     Notice  of  Termination  is  given,  the  party  receiving  such  Notice of
     Termination  notifies the other party that a dispute exists  concerning the
     termination, the Date of Termination shall be the date on which the dispute
     is finally resolved,  either by mutual written agreement of the parties, or
     by a  final  judgment,  order  or  decree  of an  arbitrator,  a  panel  of
     arbitrators  or a court of  competent  jurisdiction  (the  time for  appeal
     therefrom having expired and no appeal having been perfected).

         "Notice of Termination" shall mean a written notice which shall include
the specific  termination  provision under this Agreement relied upon, and shall
set forth in reasonable detail the facts and circumstances  claimed to provide a
basis for termination of the Employee's employment. Any purported termination of
the  Employee's  employment  hereunder  by  action  of  either  party  shall  be
communicated by delivery of a Notice of Termination to the other party.

         7. Relocation.  The Bank and the Company hereby agree that the Employee
shall not be required to relocate  his  residence at any time during the term of
this Agreement  without the Employee's  written  consent  thereto given not less
than one (1) year prior  thereto.  Furthermore,  Employee shall continue to make
his primary business headquarters in Mount Pleasant, South Carolina.

         8. Confidentiality.

         (a) The Employee  recognizes  that his activities on behalf of the Bank
require   considerable   responsibility  and  trust.   Relying  on  the  ethical
responsibilities  and undivided  loyalty of the Employee,  the Bank has and will
and the Company and its  subsidiaries  will in the future  entrust the  Employee
with highly  sensitive  confidential,  restricted  and  proprietary  information
involving Confidential Information (as defined below).

         (b) For the  purposes  of this  Agreement,  "Confidential  Information"
means any data or information,  that is material to the Bank, the Company or the
subsidiaries  of the  Company,  and not  generally  known by the public.  To the
extent  consistent  with  the  foregoing  definition,  Confidential  Information
includes (without limitation):  (i) the profit and performance reports,  pricing
policies, training manuals, marketing and pricing procedures,  financing methods
of the Bank,  the  Company or the  subsidiaries  of the  Company,  and all other
business  records of the Bank, the Company or the  subsidiaries  of the Company;
(ii)  the  identities  of  the  customers  of  the  Bank,  the  Company  or  the
subsidiaries  of the Company,  their  specific  demands,  and their  current and


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<PAGE>

anticipated  requirements for the products and services of the Bank, the Company
or the  subsidiaries  of the  Company;  (iii) the  business  plans and  internal
financial   statements  and   projections  of  the  Bank,  the  Company  or  the
subsidiaries of the Company;  and (iv) the specifics of any specialized products
or services of the Bank,  the Company or the subsidiary of the Company may offer
or provide to its customers.

         (c) The Employee recognizes the proprietary and sensitive nature of the
Bank, the Company and its subsidiaries'  Confidential Information.  The Employee
agrees to abide by all of the  Bank's  and the  Company's  rules and  procedures
designed to protect their Confidential  Information and to preserve and maintain
all such information in strict  confidence  during the Employee's  employment by
the Bank and as long thereafter as the Confidential  Information remains, in the
sole  opinion of the Bank,  the Company and its  subsidiaries,  proprietary  and
confidential to the Bank, the Company and its subsidiaries.  The Employee agrees
not to use,  disclose or in any other way use or  disseminate  any  Confidential
Information  to any person not properly  authorized by the Bank,  the Company or
the subsidiaries of the Company.

         9.  Return of  Materials.  Upon the request of the Company or the Bank,
and in any  event,  upon  the  termination  of the  Employee's  employment,  the
Employee must return to the Bank, the Company or the subsidiaries of the Company
and leave at the disposal of the Bank,  the Company or the  subsidiaries  of the
Company, all memoranda,  notes, records, and other documents or electronic files
pertaining to the business of the Bank, the Company and the  subsidiaries of the
Company,  or the  Employee's  specific  duties for such entities  (including all
copies  of such  materials).  The  Employee  must also  return to the Bank,  the
Company and the  subsidiaries  of the Company,  and leave at the disposal of the
Bank, the Company and the subsidiaries of the Company,  all materials  involving
any Confidential Information of the respective entities.

         10.  Implementation.  The covenants contained herein shall be construed
as covenants  independent of one another,  and as obligations  distinct from any
other  contract  between the Employee and the Company or the Bank. Any claim the
Employee may have against the Company or the Bank shall not constitute a defense
to enforcement by the Bank of this Agreement. The covenants made by the Employee
herein shall survive termination of the Employee's employment, regardless of who
causes the termination and under what circumstances.

         11. Restrictive Covenants. In consideration of the Bank's employment of
the Employee  and the  benefits  provided  hereby,  the Employee  agrees that in
addition to any other  limitation:  (i) for a period of twelve (12) months after
the termination of this Agreement by the Employee for other than Good Reason; or
(ii)  during  the  continuation  of base  salary  payments  pursuant  to Section
6(a)(ii)(A)  above,  whichever is later, he will not, within a twenty-five  (25)
mile radius of any operating office of the Company, any of its subsidiaries,  or
the Bank, manage,  operate or be employed by, participate in, or be connected in
any manner with the management,  operation,  or control of any banking  business
whether or not carried on by a bank.  The Employee  further  agrees,  that for a
period of twelve (12) months after the termination of his employment  hereunder,
by the  Employee  for other than Good  Reason or the  completion  of Base Salary
payments pursuant to Section 6(a)(ii)(A) above,  whichever is later, he will not
solicit the business or patronage, directly or indirectly, from any customers of
the Bank (or any other office of the Company or of a  subsidiary  of the Company
if  Employee  should have been  employed by and located at such  office) and the
Employee  will not seek to or assist others to persuade any employee of the Bank
engaged in similar work or related to the Bank's work to discontinue  employment
with  the  Bank or seek  employment  or  engage  in any  business  of the  Bank.
Furthermore,   the  Employee  will  not  communicate  to  any  person,  firm  or
corporation any information related to customer lists, prices,  secrets or other
Confidential  Information  which he might from time to time acquire with respect
to the business of the Bank, the Company,  or its subsidiaries,  or any of their
affiliates.  The Employee  agrees to disclose the contents of this  Agreement to
any subsequent employer for a period of twelve (12) months following termination
of his employment hereunder,  the termination of this Agreement or completion of
base salary payments pursuant to Section 6(a)(ii)(A) above, whichever is later.

         12. Remedies for Breach of Employment Contract.  Irreparable harm shall
be  presumed if the  Employee  breaches  any  covenant  of this  Agreement.  The
faithful observance of all covenants in this Agreement is an essential condition
to the Employee's employment,  and the Bank, the Company and the subsidiaries of
the Company are depending  upon absolute  compliance.  Damages would probably be


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very  difficult  to  ascertain  if the  Employee  breached  any covenant in this
Agreement.  This Agreement is intended to protect the proprietary  rights of the
Bank, the Company and the subsidiaries of the Company in many important ways. In
light  of  these  facts,  the  Employee  agrees  that  any  court  of  competent
jurisdiction  should immediately  enjoin any breach of this Agreement,  upon the
request of the Bank,  the Company,  the  subsidiaries  of the  Company,  and the
Employee  specifically  releases the Bank, the Company,  and the subsidiaries of
the  Company,  from  the  requirement  to post  any  bond in  connection  with a
temporary or interlocutory injunctive relief, to the extent permitted by law.

         13.  Assignment.  This Agreement shall be construed as an agreement for
personal services and shall not be subject to assignment by either party without
the written consent of both parties.

         14.  Acceleration  of Stock  Options  and  Rights.  In the event of any
termination of this Agreement  pursuant to section  6(a)(ii),  outstanding stock
options and stock appreciation  rights, and any and all rights under performance
stock  award  plans,  restricted  stock  plans and any other  stock  option,  or
incentive  stock plans shall  become  immediately  and fully  exercisable  for a
period of sixty (60) days following the last payment  required by this Agreement
to be made by the Bank or the Company to Employee,  provided,  however,  that no
such option or right shall be  exercisable  after the  termination  date of such
option or right.  The  provisions  of this  section  shall be in addition to the
Employee's rights granted in connection with such stock options or other rights,
and such rights and options shall continue to be  exercisable  pursuant to their
terms and their governing plans.

         15.  Governing  Law.  The  law of  South  Carolina  shall  govern  this
Agreement,  subject only to any conflicting  federal statutes and regulations as
they  exist  or may be  adopted  or  promulgated  from  time to  time  affecting
financial institutions whose deposit accounts are insured by the Federal Deposit
Insurance Corporation and their operations;  in the event of such conflict,  the
appropriate federal statutes and regulations shall govern this Agreement.

         16.  Arbitration.  Unless otherwise  provided by the regulations of the
Federal Deposit Insurance  Corporation or otherwise  provided in this Agreement,
any dispute or  controversy,  arising under or in connection with this Agreement
shall be settled  exclusively by arbitration in Mount Pleasant,  South Carolina,
by three  arbitrators  pursuant  to the  Federal  Arbitration  Act or the  South
Carolina Uniform Arbitration Act, as applicable, in accordance with the rules of
the American Arbitration  Association then in effect. Judgment may be entered on
the arbitrators'  award in any court having  jurisdiction.  Notwithstanding  the
foregoing,  Employee,  the  Bank  or the  Company  shall  be  entitled  to  seek
injunctive relief in any court of competent  jurisdiction  without initiating an
arbitration  proceeding.  Further,  Employee  shall be entitled to seek specific
performance  of his right to be paid  until the Date of  Termination  during the
pendency of any dispute or controversy  arising under or in connection with this
Agreement.  Any civil action seeking  injunctive relief,  specific  performance,
challenging  an  arbitration  proceeding  or award or otherwise  related to this
Agreement  will be instituted  and maintained in the federal or state courts for
Charleston  County,  South  Carolina,  and the  parties  hereby  consent  to the
personal jurisdiction of such courts. Each party to any such judicial proceeding
shall bear its own attorneys' fees, provided,  however,  that the Company or the
Bank  shall  bear  all  costs  and  expenses  arising  in  connection  with  any
arbitration  proceeding pursuant to this Section including Employee's reasonable
attorney's fees.

         17. Binding  Effect.  This Agreement and the rights,  powers and duties
set forth  herein  shall  bind and inure to the  benefit of the  successors  and
assigns of the parties hereto.

         18. Entire Agreement.  This Agreement  constitutes the entire agreement
between the parties  hereto with respect to the subject  hereof,  and supercedes
all prior agreements, written or oral, with respect to such subject matter.

         19.  Waiver.  The failure of either  party to insist in any one or more
instances upon  performance  of any terms or conditions of this Agreement  shall
not be construed a waiver of future  performance  of any such term,  covenant or
condition,  but the  obligations  of either  party with  respect  thereto  shall
continue in full force and effect.



                                       7
<PAGE>

         20.  Severability.  All agreements,  provisions and covenants contained
herein  are  severable,  and in the event  that any one or more of them shall be
held to be  invalid,  illegal or  unenforceable  in any  respect by any court of
competent  jurisdiction,  the  validity,  legality  and  enforceability  of  the
remaining  provisions  contained herein shall not in any way be affected thereby
and  this  Agreement  shall  be  interpreted  as if  such  invalid,  illegal  or
unenforceable agreements, provisions or covenants were not contained herein.

         21.  Indemnification.  The Bank and the  Company  shall  indemnify  the
Employee to the extent of the  indemnification  provided  for in any  agreement,
bylaw or charter provision of the Bank or the Company,  or any provision of law,
rule or regulation,  any of which may be applicable to the Employee or generally
applicable to other  executive  officers of the  Employee's  class or any lesser
class.

         22.  Payment  Obligation.  The Bank and the Company  recognize that the
provisions of this Agreement,  including the termination provisions,  protecting
the Employee's rights to compensation and benefits in the event of a termination
hereof, other than Termination for Cause, leave of absence or Disability, are an
essential  element of the basis of the bargain with the  Employee.  Accordingly,
all amounts  payable by the Bank or the Company  hereunder shall be paid without
notice or demand.  The Employee shall not be obligated to seek other  employment
in mitigation of the amounts payable or arrangements made under any provision of
this  Agreement;  provided,  however,  that  the  obtaining  of any  such  other
employment  shall reduce the Bank's and the  Company's  obligations  to make the
payments  and  provide  at its  expense  the  benefits  required  to be paid and
provided  under this  Agreement  by an amount  equal to the payments or benefits
received  from such other  employment  and Employee  shall  promptly  notify the
Company or the Bank of his employment and receipts therefrom.

         23.  Notices.  Any notices to be given hereunder by either party to the
other may be  effected  either  by  personal  delivery  in  writing  or by mail,
registered or certified postage prepaid,  with return receipt requested.  Mailed
notices shall be addressed to the parties at the addresses appearing herein, but
each party may change its  address  by written  notice in  accordance  with this
paragraph.  Notices  delivered  personally  shall be deemed  communicated  as of
actual receipt;  mailed notices shall be deemed communicated as of five (5) days
after mailing.

TO THE BANK:                                Chairman of the Board of Directors
                                            Southcoast Community Bank
                                            530 Johnnie Dodds Boulevard
                                            Mt. Pleasant, S.C. 29464

TO THE COMPANY:                             Chairman of the Board of Directors
                                            Southcoast Financial Corporation
                                            530 Johnnie Dodds Boulevard
                                            Mt. Pleasant, S.C. 29464

TO THE EMPLOYEE:                            William C. Heslop
                                            Southcoast Community Bank
                                            530 Johnnie Dodds Boulevard
                                            Mt. Pleasant, S.C. 29464

     IN  WITNESS  WHEREOF,  the Bank and the  Company  have duly  executed  this
Agreement by their duly  authorized  corporate  officers set forth below and the
Employee  has duly  executed  this  Agreement as of the day and year first above
written.

                              [SIGNATURES OMITTED]

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